Israel's army chief has denied any wrongdoing in selling his share portfolio hours after Hezbollah captured two Israeli troops.

Lt-Gen Dan Halutz said it was "impossible" to link the sale of shares worth 120,000 shekels ($27,500; £14,500) to the conflict that unfolded.

He said he lost $5,400 in the sale and his integrity had been "besmirched".

But some lawmakers have demanded he step down and that the prosecutor general open an investigation.

A report in Israel's Maariv newspaper said the head of the Israeli Defence Forces had gone to his bank branch hours after the capture of the soldiers on 12 July to sell the shares.

This marks a serious problem of priorities during a time when state security was in the balance

Colette AviattalLabor MP

Key share indexes fell by about 10% in the initial stages of the war but have recovered to just short of pre-war levels.

Gen Halutz told the paper: "It's true that I sold these shares at noon on July 12, but you can't link the transaction to the war. At that moment I did not think that there would be a war."

He said the report was "malicious" and "biased".

"I do not know who is behind it and I do not plan to be dragged into a subject that besmirches my integrity," he said.

Analysts say it does not seem that the general broke insider trading laws.

However, some lawmakers called for him to resign.

Labor MP Colette Aviattal said: "This marks a serious problem of priorities during a time when state security was in the balance."

Zevulon Orlev of the National Religious Party added: "During critical hours for a nation, one expects the chief of staff to be totally involved in the running of the war and not in personal questions of winnings or losses on the stock market."

An Israeli Defence Forces statement said it was "absurd" to connect Gen Halutz's private affairs to the capture of the soldiers.